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Today's Top News1. Will Verizon bond deal spark a trend?
People tend to think of the bond market as a bastion of liquidity. In certain areas, it certainly is. The Treasuries market, for example, is quite liquid. But when it comes to smaller corporate tranches that were issued many years ago, the liquidity dries up just a bit. According to one estimate, older and smaller bonds typically trade at spreads of 20 basis points or higher in relation to new issues. In the wake of the stunning success of the $49 billion sale of Verizon debt, some are wondering whether bigger is better in terms of bond issuance. "Some buyside investors have even been pushing corporate treasurers, the executives in charge of managing companies' finances, to standardise their bond issuance to better suit the needs of an altered market," according to the Financial Times. That may well translate into bigger offerings, perhaps less frequently, in a bid to ensure greater liquidity. Not everyone sees this. Some argue that "creating larger and more standardised bonds could lead to a wall of refinancing needs that come due all at once, when companies would prefer to have their obligations spread out." In the end, we may well see a few more large offerings along the lines of Apple's $17 billion offering not too long ago. The Verizon-like deals will most likely remain linked to M&A activity. Of course, we may be in the final days of a massive bull market in bonds. Perhaps all this will be moot all too soon. For more:
Read more about: bonds, Verizon Bond Deal 2. Small banks deals looking good
Is deal-making about to return to the banking industry? Well, for small banks, the conditions are certainly improving. Bloomberg notes that banks that have less than $10 billion in assets have added incentive these days to snap up other banks. At $10 billion, banks are subject to additional regulations, including a cap on interchange fee revenue that could prove quite costly. The answer in some cases is to get bigger fast. "The $10 billion sweet spot is proving a boon to regional-bank mergers and acquisitions as small institutions say they need to be bigger to swallow costs to comply with the new financial rules," according to Bloomberg. It calculates that about 57 banks with assets of less than $10 billion each have made acquisitions this year. "That's the most activity among banks of this size since the same period in 2007 when 59 made transactions. More acquisitions may occur through the end of the year as rising bank stock prices give acquirers greater currency to consummate deals, according to bankers and analysts." The desire to improve a bank's earnings picture may also stoke deals, as there are few other way of growing the bottom line right now. So are we in for a golden era of small banks deals? The conditions are in place. Stock currencies are strong, the regulatory incentives are present, and the economy is recovering. One big question is whether banks nearing the $50 billion threshold will opt to go the merger route for similar reasons. Investment bankers will no doubt be busy pitching deals. For more: Read more about: mergers, small banks 3. Ex-Goldman Sachs exec arraigned
The sordid saga of Jason Lee continues. The former Goldman Sachs managing director was scheduled to be arraigned in state court on charges that he raped a party attendee at his rented home in tony East Hampton. Many were hoping that this was a Duke Lacrosse situation, with an accuser making wild charges that would be quickly revealed as false. It still may be, but we will not know that for a while. In the meantime, the wheels of justice will turn painfully, paving a long, hard road for Lee and his family. Recall that Lee was arrested in August after police went to his rented home and determined that a woman had been sexually assaulted inside the house. He was subsequently indicted by a grand jury. He faces a maximum 25 years in prison. Lee was freed on $20,000 cash bail and has proclaimed his innocence. His lawyers tell Bloomberg that he is looking forward to clearing his name in court. And yet his career for now is pretty much over---another case of a young man throwing it all away. If the charges are untrue, then Lee has been wronged, and he has every reason to seek recourse. At this point, no details about what transpired have been released. It may have been a wild night run amok, or it may be that he was set up. We just don't know. Still, he has to bear some responsibility for allowing this to happen, for putting himself at risk. The 37-year-old had so much to lose---and he proceeded to do just that. We see this from time to time on Wall Street, and it's always a tragedy. For more:
Read more about: Criminal Charges 4. JPMorgan tops at least one league table
It hasn't been all bad news for JPMorgan Chase lately. Reuters reports some very good news: the bank has ended up in the top position in at least one league table. According to analytics firm Coalition, JPMorgan finished as the No. 1 investment bank by revenues for the first half of the year in three categories: fixed income, equities and advisory. The company's investment bank revenues came in at $13.1 billion in the first half of 2013, ahead of Goldman Sachs, Deutsche Bank, Bank of America Merrill Lynch and Citi, which all basically tied for second. In FICC, the bank finished first with revenues of $7.6 billion. Citi came in second, and Deutsche Bank came in third. In equities, the bank finished just ahead of Goldman Sachs, Morgan Stanley and UBS. In advisory and origination, Bank of America and JPMorgan tied as the top ranked bank with revenue of $2.8 billion. Goldman Sachs was third. This is hardly the final word in terms of first half league tables. Other information vendors, some of which carry more weight, will weigh in as well. But it is interesting to note that the bank's investment banking business at least does not appear to have suffered unduly due to the many regulatory issues that have crept up this year. For more: Read more about: league tables 5. Debate rages about activist hedge funds
Are activist investors really just old-style corporate raiders wearing lipstick? Plenty of people think such characterizations are way off base. DealBook writes: "Unlike their predecessors who often pursued aggressive takeovers for quick gains, this latest generation of activists are largely agitating for some sort of long-term change — a shift in business strategy, a different use of cash, even a complete overhaul of a company's board." One could quibble about whether their focus is truly long term. They are seeking a payoff, if it arrives sooner, that would be all the better. But the old-style corporate raiders seemed to revel in their reputations as agitators looking to be bought out at premium prices. While they also sought to put their allies on boards and strategic changes, they never were able to rebut the notion that at their core, they were mainly greenmail practitioners. In this era, the practitioners are more interested in portraying themselves as long-term investors, though their goals are not wholly dissimilar than their precursors. They couch all that they do in a kind of altruism for all shareholders. The big question is whether they are successful. "There is some evidence that the results bear that out. A study led by Lucian Bebchuk, a professor at Harvard Law School, published last month argues that companies singled out by these investors improved their operating performance within three years of an activist campaign. Others are not so sure. Lawyers at Wachtell, Lipton, Rosen & Katz, one of the premier defenders against activists, said in a client note earlier this week that such campaigns had damaged American companies with an emphasis on the short term." What we can all agree on is that they will not soon disappear, as institutions have been pleased with the returns. They'll continue to pony up. For more: Read more about: activist hedge funds Also NotedSPOTLIGHT ON... Foreign hedge funds set up in China Will hedge funds ever operate unfettered in the Middle Kingdom? That day is a long ways off. But in Shanghai anyway foreign hedge funds will be able to do business. The city has given permission to six U.S. and British funds to set up operations as part of a pilot program. The funds are expected to be able to raise $50 million each from Chinese institutions to invest around the world, according to DealBook. This is an encouraging sign, and one can only hope for more liberalization in the near future. Article Company News:
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Monday, September 23, 2013
| 09.23.13 | Will Verizon bond deal spark a trend?
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